Oromin Receives Positive Feasibility Study for Its OJVG Gold Project in Senegal
Lots of information here to digest, but the NAV and IRR look good!
I am looking forward to really getting into this for the next day or so, the market seems to like it.
I expect a steady rise now that any speculation of a poor FS is out of the way!
Oromin Receives Positive Feasibility Study for Its OJVG Gold Project in Senegal
Thursday July 15, 9:30 am ET
VANCOUVER, BRITISH COLUMBIA–(Marketwire – 07/15/10) – Oromin Explorations Ltd. (“Oromin”) (TSX:OLE – News)(OTC.BB:OLEPF – News), on behalf of Oromin Joint Venture Group Limited (“OJVG”), is pleased to report the results from the positive feasibility study for a proposed open pit and underground mine at its OJVG Gold Project in eastern Senegal, West Africa. The feasibility study was compiled by SRK Consulting (Canada) Inc. (“SRK”) and Ausenco Solutions Canada Inc. The completion of the final feasibility study and the receipt of a 15 year renewable mining license represent a significant advancement in the development of the project.
Highlights of the Feasibility Study and Resource Update
— A total combined mineral resource estimate exceeding 3.27 million ounces
(2.86 million measured/indicated and 410,000 inferred), to be further
updated by DRA in late August
— A mineral reserve estimate (probable classification) of 1.42 million
ounces of contained gold
— Mining of five deposits by open pit and underground mining, CIL milling
and plant commissioning in 2012
— Life of mine estimated at nine years of production at daily throughput
rates ranging from 4,250 to 7,390 tonnes per day at an average 89.2%
gold recovery
— First full three years of operation averages 196,000 gold annually at a
cash cost of $409/oz
— Using a gold price of USD$1,000 per ounce, pre-tax NPV of USD$182
million (at a 3% discount rate) generating an IRR of 21.6% and 3 year
pay back
— Using a current gold price of USD$1,200 per ounce, pre-tax NPV of
USD$361 million (at a 3% discount rate) generating an IRR of 36.3% and 2
year pay back
— Initial capital cost estimated at USD$291 million including contingency
of USD$23 million
— Proposed seasonal rainfall water reservoir is estimated to be sufficient
to supply water for processing operations, eliminating dependence on
local rivers
— Significant upside potential exists through expansion of reserves and
resources from further exploration and mining studies on the deposits
not included in the feasibility study as well as through opportunities
to improve project economics from additional value engineering studies
to be completed by the end of 2010. These opportunities include:
— Converting the inferred gold resources to indicated status with
infill and stepout drilling (to be conducted in fall 2010), thereby
allowing these resources to be included in a future mine plan
— Further evaluating the size and mining potential of the four
deposits not included in the feasibility study with the intent to
incorporate these into future mine plans
— The initial five deposits included in the feasibility study are open
to further expansion
— Additional mineralized targets remain yet to be evaluated by
drilling
— Heap leach extraction rates of 82% for Masato oxide mineralization
may present the opportunity to treat the low grade stockpile of
oxide/weathered mineralization not included in the feasibility study
Chet Idziszek, Oromin’s CEO, stated, “We are pleased with the conclusions of the feasibility study despite the fact that, due to time constraints related to issuance of the mining license, it presents only a portion of the overall project value as it was based on the production from only five of the nine known gold deposits. The five deposits are all open to considerable expansion and the value of the remaining mineralized targets will be evaluated by drill testing during the remainder of 2010. Further resource updates are expected in August and again by year end 2010.”
“The positive results from the feasibility study demonstrate that the OJVG gold project is currently economic and clearly shows significant upside potential. For example, indicated resources at the higher grade Golouma deposits currently contain 1.2 million ounces of indicated gold resources to approximately 300 metres vertical extent, however, the deposits remain open at depth. Analogous deposits such as the Obouassi mine in Ghana continue to depths in excess of 2.5 kilometres. At Masato, drilling will focus on defining underground reserves beneath the planned open pit as this is the first opportunity to exploit underground mining within the Masato style bulk tonnage trend. In addition, the large aerial extent and favourable results from the Masato style bulk tonnage Maki Medina, Niakafiri Southeast and Southwest and Kobokoto deposits suggest that these deposits could, in the aggregate, exceed the 1.67 million ounce Masato deposit in size and also be a good source of additional soft ore. These three potential value additives alone would significantly increase the financial returns from the OJVG gold project.”
“The completion of the feasibility study at this time was done to fulfill the requirements of the mining license granted to OJVG in January this year and represents a crucial step forward in the development of the OJVG gold project. The study confirms a robust rate of return for investors and a project that will see significant investment into the Republic of Senegal for the benefit of both the local community and the country as a whole. OJVG is grateful to the Government of Senegal for its support and to OJVG’s employees and consultants whose hard work has advanced the project to its present state.”
In their conclusions, SRK states, “Industry standard mineral resource estimation, mining, process design, construction methods and economic evaluation practices have been used to assess the (OJVG) Project.”
“To date, five of the nine (OJVG) deposits, encompassing Golouma South, Golouma West, Masato, Kerekounda, and Kourouloulou represent a significant open pit and underground ore reserve. According to the assumptions of this study, the five deposits are estimated to be economic to exploit via a combination of open pit and underground methods.”
“SRK considers the exploration potential at (the OJVG project) to be very good with the potential to increase resources through expanding current deposits at depth, better defining known exploration targets and drilling new anomalies.”
SRK Mineral Resource Estimate
OJVG’s concession contains two styles of mineralization hosted within a NNE trending 8 km wide structural corridor that runs the entire 22 km length of the concession. The western side of this corridor hosts the OJVG’s lower grade, bulk mining style deposits collectively referred to as the “Masato Style” bulk tonnage deposits while the eastern side hosts OJVG’s higher grade deposits, collectively referred to as the “Golouma Style” higher grade deposits. The respective resource tonnages, calculated at USD$1,200/ounce gold, for each of these deposit styles are shown in Table 1. All deposits from the OJVG project could be processed in the same gold plant.
All SRK resource modelling was done under the supervision of Wayne Barnett, Pr.Sci.Nat., with contributions by Gilles Arseneau, P.Geo., David Rowe, CPG, and Abolfazl Ghayemghamian, P.Geo. Marek Nowak, P.Eng., who undertook quality control checks on the sampling and analytical procedures, and on the assay results. He also analyzed the data, reviewed and validated the mineral resource estimates. The Maki Medina and Niakafiri Southeast were not modified by SRK from the original August 2009 resources estimate (See Oromin Explorations Ltd. Press Release September, 2009). All of the resources were modeled using an approximate 0.50 g/t Au cut off grade creating a 0.50 g/t Au grade shell solid for each mineralized zone, except Kerekounda and Kourouloulou which were created with a 1 g/t grade shell. Variogram models were created for all of the grade shell solids except Kourouloulou, which relied upon inverse distant squared methodology. Assay data from each grade shell was evaluated and appropriately capped for the purposes of this estimation.
Block models were created for each of the grade shells and subsequently constrained at depth and laterally by an optimized Whittle shell based on the following parameters; USD$1,200 oz Au, ore mining and processing costs of USD$12.75/tonne, overall pit slope of 45 degrees, metallurgical recovery of 95% and appropriate dilution, offsite costs and royalties. The reader is cautioned that the results from the conceptual pit optimization work are used solely for the purpose of reporting mineral resources that have “reasonable prospects” for economic extraction by an open pit and do not represent mineral reserves.
Final open pit indicated and inferred resource tonnage, gold grade and gold content within the optimized pit shell was reported at a 0.40 g/t cut off grade. Resource tonnage, gold grade and gold content tabulated from contiguous portions of the mineralization outside of the optimized pit shell, and potentially amenable to underground mining methods, were reported at a 1.0 g/t cut off grade.
Table 1: SRK Mineral Resource Statement
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Au Contained
Tonnes Grade Au Contained Au
Deposit Class ('000s) (g/t) (kg) (oz)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Golouma Style Higher Grade Deposits
Combined Open Pit Constrained (cut-off grade 0.4 g/t) and Underground
(cut-off grade 1.0 g/t) resources
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Indicated 2,352 3.86 9,079 291,900
Golouma South -------------------------------------------------------------
Inferred 172 1.38 238 7,700
---------------------------------------------------------------------------
Indicated 7,022 2.99 20,999 675,100
Golouma West -------------------------------------------------------------
Inferred 578 3.84 2,221 71,400
---------------------------------------------------------------------------
Indicated 1,073 6.34 6,796 218,500
Kerekounda -------------------------------------------------------------
Inferred 189 3.99 756 24,300
---------------------------------------------------------------------------
Indicated 85 11.92 1,012 32,500
Kourouloulou -------------------------------------------------------------
Inferred 177 8.00 1,415 45,500
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Indicated 10,533 3.59 37,885 1,218,100
Subtotal -------------------------------------------------------------
Inferred 1,116 4.15 4,631 148,900
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Masato Style Bulk Tonnage Deposits
Combined Open Pit Constrained (cut-off grade 0.4 g/t) and Underground
(cut-off grade 1.0 g/t) resources
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Indicated 35,062 1.17 41,017 1,318,700
Masato -------------------------------------------------------------
Inferred 2,389 1.21 2,901 93,300
---------------------------------------------------------------------------
Indicated
Niakafiri -------------------------------------------------------------
Inferred 5,986 0.74 4,430 142,400
---------------------------------------------------------------------------
Indicated
Maki Medina -------------------------------------------------------------
Inferred 1,500 1.50 2,060 70,000
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Indicated 35,062 1.17 41,017 1,318,700
Subtotal -------------------------------------------------------------
Inferred 9,875 0.95 9,391 305,600
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Indicated 45,594 1.73 78,902 2,536,800
TOTAL -------------------------------------------------------------
Inferred 10,991 1.28 14,022 454,500
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In the opinion of SRK, the block model resource estimates reported herein are a reasonable representation of the gold mineral resources found in the OJVG deposits at the current level of sampling. Mineral resources for the OJVG Project are reported in accordance with the guidelines of the Canadian Securities Administrators National Instrument 43-101, and have been estimated in conformity with generally accepted CIM “Estimation and Mineral Resource and Mineral Reserve Best Practices” guidelines. Mineral resources are not mineral reserves and do not have demonstrated economic viability. The resource estimate was completed by Wayne Barnett, Pr.Sci.Nat. (#400237/04), an independent qualified person as this term is defined in National Instrument 43 101.
DRA Mineral Resource Estimate
In May 2010, the OJVG engaged DRA Americas Inc. (“DRA”) to complete mineral resource estimates for the Masato, Maki Medina, Niakafiri SE, Niakafiri SW, Kobokoto and Koulouqwinde Deposits, using drill data collected after the Feasibility Study cut-off dates in Q1 of 2010 for inclusion of geological data. At the time of this release, DRA has completed mineral resource estimates for Masato and Maki Medina. The DRA resource estimates are upgrades to the estimate completed on these deposits by SRK as it includes drilling up to May of 2010. At Masato, the DRA estimate has outlined an unconstrained global mineral resource estimate at a 0.40 g/t Au cut off grade containing 1.64 million ounces in the measured and indicated categories and a further 31,100 ounces in the inferred category. At Maki Medina, the DRA estimate has outlined an unconstrained global mineral resource estimate at a 0.40 g/t Au cut off grade containing 90,900 ounces in the inferred category. Detailed results of the DRA resource estimate are summarized in the following table.
Table 1a: DRA Mineral Resource Update Statement
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Au Contained Contained
Tonnes Grade Au Au
Deposit Class ('000s) (g/t) (kg) (oz)
--------------------------------------------------------------------------
Masato Style Bulk Tonnage Deposits - DRA Resource Update
Open Pit (cut-off grade 0.4 g/t) unconstrained resources
--------------------------------------------------------------------------
Masato Measured 28,600 1.27 36,100 1,161,000
----------------------------------------------------------
Indicated 14,400 1.03 14,900 479,000
----------------------------------------------------------
Inferred 800 1.21 970 31,100
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Maki Medina Inferred 1,850 1.53 2,830 90,900
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Meas + Ind 43,000 1.19 51,158 1,640,000
----------------------------------------------------------
TOTAL Inferred 2,650 1.43 3,804 122,000
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All of the resources were modeled using an approximate 0.50 g/t Au cut off grade creating a 0.50 g/t Au grade shell solid for each mineralized zone and final measured, indicated and inferred resource tonnage, gold grade and gold content was reported at a 0.40 g/t cut off grade. Variogram models were created for all of the grade shell solids and appropriately capped for the purposes of this estimation. All samples were composited to 1m and ordinary Kriging was the method of interpolation. The reader is cautioned that the results from the DRA resource estimate were not constrained by an optimized pit shell and a cut off grade of 0.40 g/t Au was used for the purpose of reporting mineral resources that have “reasonable prospects” for economic extraction by an open pit and do not represent mineral reserves. The resource estimate was prepared by Dexter Ferreira, P. Nat. Sci., a QP as defined by National Instrument 43-101.
When combined with SRK’s mineral resource estimates for the Golouma West, Golouma South, Kerekounda, Kourouloulou and Masato deposits, the total combined resource ounces on the OJVG Project is 3.27 million ounces (2.86 million ounces of measured and indicated, 410,000 ounces inferred.
SRK Mineral Reserve Estimate
The mineral reserve estimate for the OJVG open pits was defined by applying economic factors for gold price (based on a three year trailing average gold price at the end of Q1 of 2010 of UD$880/ounce), mining dilution, process recovery, operating costs, refining/transport costs and royalties to the SRK mineral resource estimate. The mining, processing and general administration costs are based on feasibility level engineering for the expected mill throughput rate. A distinction has been made between material types (soft vs. hard) for both ore and waste in order to capture the expected variation in mining and processing costs and the mill production rates. The mineral inventory block models for each of the deposits were evaluated with the Gemcom Whittle – Strategic Mine Planning™ (“Whittle”) software to determine optimal mining shells.
The mineral reserve estimate for the OJVG project has been subdivided into an open pit portion and an underground portion. Table 2 presents the open pit reserve and Table 3 presents the underground reserve, while the total reserve summary is presented in Table 4. The reserves represent the five deposits used in the feasibility study production schedule.
Table 2: Open Pit Mineral Reserves
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Cut- Diluted
Diluted off(i) Grade Contained Gold
Reserve Tonnes --------------------------------
Deposit Class ('000s) (g/t) (g/t) Au(kg) Au (koz)
---------------------------------------------------------------------------
Golouma Style Higher Grade Deposits
---------------------------------------------------------------------------
Golouma W Probable 1,732 0.90 3.53 6,114 197
Golouma S Probable 959 0.89 4.79 4,599 148
Kerekounda Probable 42 0.66 6.54 278 9
---------------------------------------------------------------------------
Subtotal Golouma Style Probable 2,734 0.90 4.02 10,991 353
---------------------------------------------------------------------------
Masato Style Bulk Tonnage Deposits
---------------------------------------------------------------------------
Masato Probable 10,154 0.70 1.41 14,306 460
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Subtotal Masato Style Probable 10,154 0.70 1.41 14,306 460
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Total Mineral Reserve Probable 12,888 0.74 1.96 25,296 813
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Note: (i) Internal (mill) average cut-off based on Whittle optimization
parameters
Table 3: Underground Mineral Reserves
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Cut- Diluted
Diluted off Grade Contained Gold
Golouma Style Higher Reserve Tonnes --------------------------------
Grade Deposits Class ('000s) (g/t) (g/t) Au (kg) Au (koz)
---------------------------------------------------------------------------
Golouma W Probable 2,656 2.0 3.61 9,601 309
Golouma S Probable 710 2.0 4.07 2,892 93
Kerekounda Probable 1,154 2.0 4.77 5,500 177
Kourouloulou Probable 110 2.0 8.01 880 28
---------------------------------------------------------------------------
Subtotal Golouma Style Probable 4,630 2.0 4.08 18,873 607
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Table 4: Combined Open Pit and Underground Mineral Reserves
---------------------------------------------------------------------------
Cut- Diluted
Diluted off Grade Contained Gold
Reserve Tonnes --------------------------------
Deposit Class ('000s) (g/t) (g/t) Au (kg) Au (koz)
---------------------------------------------------------------------------
Golouma Style Higher Grade Deposits
---------------------------------------------------------------------------
Golouma W Probable 4,388 1.57 3.58 15,715 505
Golouma S Probable 1,669 1.36 4.49 7,491 241
Kerekounda Probable 1,196 1.95 4.83 5,778 186
Kourouloulou Probable 110 2.0 8.01 880 28
---------------------------------------------------------------------------
Subtotal Golouma Style Probable 7,364 1.59 4.06 29,864 960
---------------------------------------------------------------------------
Masato Style Bulk Tonnage Deposits
---------------------------------------------------------------------------
Masato Probable 10,154 0.70 1.41 14,306 460
---------------------------------------------------------------------------
Subtotal Masato Style Probable 10,154 0.70 1.41 14,306 460
---------------------------------------------------------------------------
Total Mineral Reserve Probable 17,517 1.07 2.52 44,170 1,420
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Exploration will continue at the Maki Medina and Niakafiri Southeast deposits with the objective of converting inferred resources to a higher classification; at existing deposits to increase both inferred and indicated resources as well as reserves; and on newer discoveries (including Niakafiri Southwest, Kobokoto, Koutouniokollo) to increase overall resources of both soft and hard ore types.
Mining
Mining of the Golouma South, Golouma West, Masato, Kerekounda, and Kourouloulou deposits will take place using both open pit and underground mining, CIL milling with plant commissioning in 2012. During pre-production construction in 2012, an ore stockpile is established for mill commissioning which is then depleted during the first full year of commercial production in 2013. The plant throughput is planned at a yearly production rate of 1.7 million tonnes per annum for hard ore and 2.7 million tonnes per annum for soft ore.
The OJVG open pit and underground mines will produce a total of 17.6 million tonnes (Mt) of ore and 78.2 Mt of waste rock over a nine year mine operating period. The mine schedule focuses on achieving the required plant feed production rate, mining of higher grade material early in the schedule, while balancing stripping ratios. The LOM stripping ratio (waste to ore) for Masato is 3.7:1 and the combined weighted average stripping ratio for Golouma West, Golouma South and Kerekounda is 14.1:1, yielding a combined weighted average stripping ratio of 5.9:1. The mining schedule maximizes the attainable mill throughputs based on the soft/hard ore ratios produced. The OJVG project is most economical when the open pit phases and the underground workings are mined concurrently. This approach allows the higher underground ore grades to be milled initially yet allows the open pits to provide the additional ore feed to maintain the mill at maximum capacity.
Average annual production for the eight years of full production from 2013 to 2020, inclusive, is expected to be 164,888 ounces.
Table 5 below is a summary of total material movement by year for the LOM mine production schedule. The head grade decrease seen in 2014 to 2017 is offset by higher production rates due to the milling of soft ore from Masato, maintaining a relatively high annual gold output during this period.
Table 5: Total Production Schedule - OJVG Deposits
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YEAR
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Parameter Unit Total 2012 2013 2014 2015 2016
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ALL DEPOSITS
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Total soft waste Mt 24.04 5.32 4.11 4.69 3.87 0.48
Total hard waste Mt 54.12 7.26 13.59 8.51 3.18 3.31
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Total Waste Mt 78.15 12.58 17.70 13.20 7.05 3.79
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ROM soft ore Mt 6.14 0.17 0.14 1.21 1.91 1.01
Gold grade soft ore g/t Au 1.34 3.75 3.27 1.19 1.19 1.34
ROM hard ore Mt 11.44 0.42 1.34 1.29 0.78 1.37
Gold grade hard ore g/t Au 3.16 4.83 4.14 4.08 4.17 3.03
Soft ore ounces
mined oz Au 265,414 21,006 14,765 46,411 73,030 43,335
Hard ore ounces
mined oz Au 1,162,966 64,927 178,457 169,739 105,277 133,546
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Total ore mined Mt 17.58 0.59 1.48 2.51 2.70 2.38
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Total mined grade Au g/t 2.53 4.51 4.06 2.68 2.06 2.31
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Total mined ounces oz Au 1,428,400 85,900 193,200 216,100 178,300 176,900
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Avg O / P mining
rate t/day 35,174 50,535 40,463 24,162 14,879
----------------------------------------------------------------------------
Total ore processed Mt 17.58 0.30 1.77 2.51 2.70 2.38
----------------------------------------------------------------------------
Mill head grade Au g/t 2.53 4.51 4.13 2.68 2.06 2.31
----------------------------------------------------------------------------
Plant throughput t/day 822 4,858 6,871 7,393 6,518
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---------------------------------------
YEAR
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Parameter Unit Total 2017 2018 2019 2020 2021
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ALL DEPOSITS
----------------------------------------------------------------------------
Total soft waste Mt 24.04 5.44 0.13 0.00 - -
Total hard waste Mt 54.12 6.21 8.55 2.62 0.84 0.03
----------------------------------------------------------------------------
Total Waste Mt 78.15 11.65 8.69 2.62 0.84 0.03
----------------------------------------------------------------------------
ROM soft ore Mt 6.14 1.52 0.17 0.00 - -
Gold grade soft ore g/t Au 1.34 1.26 0.96 1.14 - -
ROM hard ore Mt 11.44 1.16 1.63 1.65 1.55 0.23
Gold grade hard ore g/t Au 3.16 2.61 2.43 2.35 2.77 3.12
Soft ore ounces
mined oz Au 265,414 61,671 5,154 42 - -
Hard ore ounces
mined oz Au 1,162,966 97,219 127,105 124,828 138,453 23,414
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Total ore mined Mt 17.58 2.68 1.79 1.65 1.55 0.23
----------------------------------------------------------------------------
Total mined grade Au g/t 2.53 1.84 2.29 2.35 2.77 3.12
----------------------------------------------------------------------------
Total mined ounces oz Au 1,428,400 158,900 132,300 124,900 138,500 23,400
----------------------------------------------------------------------------
Avg O / P mining
rate t/day 37,228 26,646 9,639 4,470 -
----------------------------------------------------------------------------
Total ore processed Mt 17.58 2.68 1.79 1.65 1.55 0.23
----------------------------------------------------------------------------
Mill head grade Au g/t 2.53 1.84 2.29 2.35 2.77 3.12
----------------------------------------------------------------------------
Plant throughput t/day 7,349 4,915 4,534 4,260 4,247
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Processing
The stand-alone process plant and associated service facilities for the OJVG gold project are designed to process run of mine (“ROM”) ore delivered to the primary crusher, to ultimately produce dore bars. The milling process encompasses crushing and grinding of the ROM ore, carbon in leach cyanidation and adsorption, carbon stripping, electro-winning and smelting to produce gold bars that are then shipped to a refinery for final processing. The tailings will be thickened before placement in the tailings management facility to conserve water.
The key design criteria used in the feasibility for the plant design are listed below and these will be optimized in the next stage of engineering:
-- Treatment of an average 4,540 dry metric tonnes per day ("t/d") for 365
days per year, after allowance for availability whilst treating 100%
primary hard (un-weathered) ore;
-- Treatment of an average 7,390 t/d for 365 days per year, after allowance
for availability whilst treating weak weathered (soft) ore, or a blend
of soft and hard ore containing no more that 43% hard ore;
-- Design mill availability of 88%, being 7,709 operating hours per year,
with standby equipment in critical areas, and
-- Sufficient plant design flexibility for treatment of all ore types from
all deposits as per test work completed at design throughput.
The soft (weathered) ore treatment rate is higher than the primary hard ore treatment rate due to the ore being significantly less competent and therefore requiring less power in the grinding circuit. Overall gold extractions seen in the various metallurgical test work programs ranged from 88 – 95 % depending on the ore lithology.
Capital Costs
Pre-production development capital for project facilities is estimated to be approximately $291.5M and includes open pit pre-stripping, underground (“UG”) mine development for two deposits and plant commissioning costs, as well as mobile equipment costs and site construction costs plus contingency. Ongoing life-of-mine sustaining capital equates to $59.1M, including UG mobile equipment replacements, waste facility expansions and ongoing UG development. These are based on un-escalated 1stQ-2010 US dollars.
An overall contingency of 8% was applied, based on a 10% contingency for all items, except open pit and underground mobile equipment, which was deemed to carry the necessary costing detail and allowances to eliminate the need for contingency.
Table 6: LOM Capital Cost Estimate ---------------------------------------------------------------------------- Description Units Capital Cost Estimate ---------------------------------------------------------------------------- Pre-production Capital Underground Mine M$ 27.6 Open Pit Mine M$ 58.0 Mill M$ 53.0 Infrastructure M$ 67.5 Owner's Costs M$ 20.5 Indirect Costs M$ 30.0 Mine Infrastructure M$ 7.5 Misc. M$ 4.8 Contingency M$ 22.6 ---------------------------------------------------------------------------- Sub-total Pre-production Capital M$ 291.5 ---------------------------------------------------------------------------- Sustaining and Closure Capital M$ 59.1 ---------------------------------------------------------------------------- Total Capital Cost Estimate M$ 350.6 ----------------------------------------------------------------------------
Operating Costs
The estimated operating costs for the OJVG gold project are set out in the following tables:
Table 7: Unit Operating Cost Summary ---------------------------------------------------------------------------- Parameter Unit Value ---------------------------------------------------------------------------- Open Pit Mining (avg soft & hard) $/tonne mined 1.55 Underground Mining $/tonne mined 33.58 ---------------------------------------------------------------------------- Total Mining (average) $/tonne milled 15.72 Processing (avg soft & hard) $/tonne milled 11.64 G&A $/tonne milled 4.15 Import Duty (after year 2016) $/tonne milled 1.83 ---------------------------------------------------------------------------- TOTAL $/tonne milled 33.34 ----------------------------------------------------------------------------
Economic Analyses
Three simplified cash flow analyses were compiled based on varying gold prices. For each case the gold price was held constant through the project life and all are based on the same mine plan developed using the $880/oz gold price. In addition, the minimum seven year tax free period was used in the calculations; however, this period may be increased to up to fifteen years after further negotiations with the Government of Senegal. The gold prices used in each cash flow analysis are:
-- Case 1: $880/oz gold; -- Case 2: $1,000/oz gold; -- Case 3: $1,200/oz gold.
The $880/oz gold price used for reserve calculation represents the three year gold price average to the end of Q1 of 2010. The other two cases ($1000/oz (Case 2) and $1200/oz (Case 3)) represent more current gold price scenarios.
Common assumptions to all three cases include:
-- 3% discount rate ("DR") for net present value calculation (based on the
internal financing capability of one of OJVG's major shareholders);
-- 100% equity financing;
-- Exclusion of all duties and taxes for a seven year period starting in
January 2010 with a 15% import duty applied to 80% of operating costs
starting in year 2016 and a 20% corporate income tax was starting in
year 2016.
-- Unit of production ("UOP") depletion was calculated on capital expenses
not included in depreciation categories. Depletion items included things
such as UG development and infrastructure, OP pre-stripping, owner's
costs, road, dams, indirect costs, water management and closure.
-- A 15% straight-line depreciation rate was applied to all other capital
expenses, including mobile equipment, process plant, on and off site
infrastructure, first fills, spares, and mine miscellaneous.
-- Depletion and depreciation were accumulated and carried forward until
they could be utilized for tax purposes;
-- 3% government royalty on payable gold revenue;
-- 10% government net revenue share after the payback of all capital costs;
-- 100% payable gold with a $7.00/oz offsite cost;
-- All 2009 costs assumed to be sunk costs with economic analysis beginning
in 2010 (2010 is Year -3);
-- Plant commissioning takes place in the 4th quarter of 2012 and
commercial plant production begins January 2013.
The discounted cash flow analyses are summarized in the following table:
Table 8: Cash Flow Analysis Results
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Case 1 Case 2 Case 3
------------------------------------
Parameter Unit $880/oz Au $1000/oz Au $1200/oz Au
----------------------------------------------------------------------------
Off site cost $/oz 7.00 7.00 7.00
Royalty @ 3% of NSR $/oz 26.19 29.79 35.79
Net gold price $/oz 846.81 963.21 1157.21
----------------------------------------------------------------------------
Ore mined Mt 17.5 17.5 17.5
----------------------------------------------------------------------------
Average grade g/t Au 2.52 2.52 2.52
----------------------------------------------------------------------------
Average process recovery % 89.2 89.2 89.2
----------------------------------------------------------------------------
Gold produced M. oz. 1.267 1.267 1.267
----------------------------------------------------------------------------
Unit operating cost per
tonne milled $/t milled 33.34 33.34 33.34
Unit operating cost per oz $/oz Au 461 461 461
----------------------------------------------------------------------------
Pre-production capital cost $M 292 292 292
----------------------------------------------------------------------------
Total capital cost
(Life of mine) $M 351 351 351
----------------------------------------------------------------------------
Pre-tax NPV0% $M 119 252 472
Pre-tax NPV3% $M 74 182 361
Pre-tax IRR % 11.2 21.6 36.3
Pre-tax payback period Years 4 3 2
----------------------------------------------------------------------------
The results of the economic analysis indicate that the project demonstrates positive economics for all three cases. The project break-even gold price is $796/oz using a 3% discount rate.
As stated above, the price of $880 per ounce used to calculate reserves and used as the basis of Case 1 above was the three year gold price average to the end of Q1 of 2010. As at June 24, 2010, the three year average gold price had risen to $925 per ounce and Oromin has calculated a pre-tax NPV of $117 million based on the same parameters used in Table 8 above, including a 3% discount rate. Given the steady increase in the three year average gold price, Oromin believes that Case 2 represents a more reasonable estimate of the project’s NPV as the three year average has risen further to $937 as of July 14, 2010.
Sensitivity analyses were done by individually modifying the capital cost, operating cost, metal price and grade up and down by 20% to show the sensitivity of the pre-tax net present value using a 3% discount rate (“NPV3%”). The results of the sensitivity analyses show that the project is most sensitive to gold price and mill feed grade.
For Case 1, a 20% increase in gold price or metal grade leads to a 319% increase in pre-tax NPV3% from $74M to $236M. Conversely a 20% reduction in metal price or mill feed grade the pre-tax NPV3% drops from $74M to -$88M for Case 1. Operating costs are the next most sensitive parameter. A 20% increase in operating costs reduces the NPV3% by $83M and a 20% decrease in operating cost increases NPV3% by $83M. The project economics are only slightly less sensitive to capital cost than operating costs.
For Case 2, a 20% increase in gold price or metal grade leads to a 98% increase in pre-tax NPV3% from $182M to $361M. Conversely a 20% reduction in metal price or mill feed grade the pre-tax NPV3% drops from $182M to $4M. Operating costs are the next most sensitive parameter. A 20% increase in operating costs reduces the Case 2 pre-tax NPV3% by $82M and a 20% decrease in operating cost increases NPV3% by $89M. The project economics are only slightly less sensitive to capital cost than operating costs.
For Case 3, a 20% increase in gold price or metal grade leads to a 62% increase in pre-tax NPV3% from $361M to $586M. Conversely a 20% reduction in metal price or mill feed grade the pre-tax NPV3% drops from $361M to $144M. Once again, operating costs are the next most sensitive parameter. A 20% increase in operating costs reduces the Case 3 pre-tax NPV3% by $87M and a 20% decrease in operating cost increases NPV3% by $87M. The project economics are less sensitive to capital cost than operating costs.
Outlook and Opportunities
Subject to the development decision by OJVG, Oromin expects that detailed value engineering studies, followed by construction, will begin in Q4 of 2010 in accordance with the investment and development plan submitted to the Government of Senegal.
SRK considers the exploration potential at the OJVG gold project to be very good with the potential to increase resources through expanding current deposits at depth, better defining known exploration targets and drilling new anomalies. As a result, both prior to and concurrent with construction and development operations, OJVG will continue exploration at the Maki Medina and Niakafiri Southeast deposits in order to convert inferred resources to higher classification; at existing deposits to increase both inferred and indicated resources as well as reserves; and on newer discoveries (Niakafiri Southwest, Kobokoto, Kotouniokollo) to increase overall resources of both soft and hard ore types.
The most significant opportunities that should be investigated to improve the project’s financial results are listed below:
-- Conversion of inferred resources to higher classifications to support
inclusion in the production schedule;
-- Discovering new mineral resources and mineral reserves;
-- Expansion of existing deposit dimensions both laterally and vertically;
-- Investigating the option of partnering with other regional mining
projects, either still in the evaluation stage or at an operating stage
in order to take advantage of logistical synergies.
-- Increasing the soft ore percentage of reserves such that higher
processing throughput rates can extend for longer into the mine life;
-- Underground ore grades will locally be higher than modelled once
underground mining takes place, since the grades from high grade drill
intercepts are smoothed during the geostatistical interpolation process.
The continuity of high grade intersections is unknown but may offer
flexibility and opportunities during mining;
-- If deposit continuity and regularity are verified, there is an
opportunity to change the mining method that may lower operating costs
without having a negative affect on dilution;
-- A 12% cost savings in capital for both the water reservoir dam and
tailings dams could be attained by changing the blanket drain to a
finger drain. Further optimization study is required, but early
indication suggests that this may be attainable;
-- Reduce the installed SAG and ball mill motors from 4,000 kW to 3,500 kW
based on further comminution modelling and trade-off study;
-- Increase the CIL leach tank volume from 1,174 m(3) to 2,000 m(3)
providing an increased residence time at the maximum throughput rate.
This increase in residence time at the maximum throughput rate is
expected to increase the overall gold recovery by around 1 - 1.5%.
-- Utilize a stockpile/reclaim feeder design with the main benefits being
improved overall plant availability due to multiple reclaim feeders, and
improved blending of crushed ore to the mill providing downstream plant
optimization;
-- Incorporate heap leaching as a processing option. This study should take
into consideration the marginal ore grade potential in the other open
pit deposits that are still in the resource definition stage; and
-- There is potential to recover unleached gold lost to tailings through a
pyrite flotation circuit prior to the CIL circuit. This may increase the
overall gold recovery but further test work is required to evaluate the
economic viability of this option.
Environmental and Social
OJVG is currently working on the completion of the Environmental and Social Impact Assessment (“ESIA”) for the OJVG gold project. The ESIA is being written to follow the requirements of the International Finance Corporation and the Equator Principles. It is scheduled to be delivered to the Senegalese Government in October 2010. SRK is the principal consultant engaged by OJVG to complete the ESIA.
All baseline environmental and social studies and corresponding impact analyses have been initiated. The majority of these studies are complete and the impact analyses are in the process of being finalized. Baseline studies completed include water quality, hydrological and hydro-geological studies, terrestrial and aquatic flora and fauna, archaeological, landscape and visual quality, human and animal health, stakeholder mapping and land ownership surveys. With completion of the feasibility study and the project design, SRK is now finalizing the impact assessment aspect of the ESIA.
OJVG initiated a public participation program in 2008, in advance of the commencement of the baseline monitoring programs. Workshops and public meetings have been held in communities within the direct area of influence, with the participation of local, regional and national government authorities, and will continue to be conducted during the evaluation and review of the ESIA.
Qualified Persons
SRK Feasibility Study
The feasibility study was prepared by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101, with the collaboration of the Oromin technical staff. The QPs have reviewed and approved the content of this news release. The following consultants participated in the study:
-- SRK, under the direction of Gordon Doerksen, P.Eng. (overall project
management, underground mining and reserve estimation, economic
analysis, environmental review), Dr. Wayne Barnett, P. Nat. Sci., Nat.
Sci. (mineral resource estimation, QA/QC, geology), Ryan Campbell,
P.Eng. (geotechnical engineering), Mark Liskowich, P.Geo. (environmental
and social impact assessment), Dino Pilotto, P.Eng. (open pit mine
engineering, open pit mineral reserve estimate), Michael Royle M.
App.Sci., P.Geo (hydrogeology) and Dr. Maritz Rykaart, P.Eng. (water
storage and waste management engineering)
-- Ausenco Solutions Canada Inc. under the direction of Clint Donkin,
AusIMM (metallurgy, mineral processing and infrastructure)
A NI 43-101 compliant Technical Report will be filed on the Company’s website and on SEDAR within 45 days.
DRA Mineral Resource Estimate
The DRA resource estimate update was prepared by Dexter Ferreira, P. Nat. Sci., a QP as defined by National Instrument 43-101.
Conference Call
Oromin will hold a conference call on Monday, July 19, 2010 at 1:00 p.m. PDT in which its executive management will discuss the feasibility study and respond to questions from analysts and investors. To join the call:
-- In Canada and the United States dial toll free 1-866-365-4409 -- International +303-248-9656
When prompted, all callers should enter the conference code – 3318772 – followed by the number sign.
To find out more about Oromin Explorations Ltd., visit www.oromin.com.
On behalf of the Board of Directors of OROMIN EXPLORATIONS LTD.
Chet Idziszek, President
